The company's 1-3Q2024 revenue decreased 2.22% year on year, and net profit to mother decreased by 47.32% year on year. The company announced the 2024 three-quarter report: 1-3Q2024 achieved operating income of 9.047 billion yuan, a year-on-year decrease of 2.22%, and realized net profit due to mother of 0.118 billion yuan, a year-on-year decrease of 47.32%, and realized net profit deducted from mother 0.062 billion yuan, a year-on-year decrease of 48.66%.

Looking at the single-quarter split, 3Q2024 achieved operating income of 2.928 billion yuan, a year-on-year decrease of 3.05%, achieving net profit attributable to mother of -0.036 billion yuan, and 0.01 billion yuan in the same period last year. Net profit without deduction to mother was -0.054 billion yuan, and the amount of losses increased year-on-year.

The company's 1-3Q2024 comprehensive gross margin decreased by 0.99 percentage points. The cost ratio decreased by 2.04 percentage points during the period 1-3Q2024, and the company's comprehensive gross margin was 36.50%, down 0.99 percentage points from the previous year. Looking at the single-quarter split, the 3Q2024 company's comprehensive gross margin was 35.40%, down 1.16 percentage points from the previous year.

The 1-3Q2024 company's expense ratio for the period was 34.52%, down 2.04 percentage points year on year. Among them, sales/management/finance/R&D expenses were 30.33%/3.05%/0.44%/0.70%, respectively, with year-on-year changes of -0.96/ +0.01/-1.09/+0.001 percentage points, respectively. The 3Q2024 company's expense ratio for the period was 36.42%, down 2.22 percentage points year on year. Among them, sales/management/finance/R&D expenses were 32.24%/3.09%/0.36%/0.73%, respectively, with year-on-year changes of -1.05/ -0.15/ -1.06/+0.04 percentage points, respectively.

Accelerate store upgrades and transformation and launch SP @CE3 .0 stores

In 2024, the company fully upgraded its SP @CE brand image. On September 6, 2024, the company's first SP @CE3 .0 store was launched at Shenzhen Baoan Tianhong Shopping Center. On the day of opening, with no promotions, sales increased 196% year over year and 121% month over month. The shopping center business format is speeding up brand renewal, increasing the introduction of new trend products such as trendy games, miscellaneous goods, and influencer restaurants, rationally planning store space, and focusing on increasing occupancy rates. The department store business dynamically adjusts the proportion of stores in various business formats, further promotes zero-supply cooperation, and steadily promotes the transformation into a community living center.

Lower profit forecasts and maintain “buy” ratings

The company's performance fell short of our previous expectations, mainly due to the relative pressure on the company's department store business. Given the intense competition in the offline retail industry, we lowered our forecast for the company's 2024/2025/2025/2026 net profit forecast of 35%/40%/42% to 0.121/0.12/0.122 billion yuan. The company has a certain competitive advantage in Shenzhen and other places, accelerates the upgrading of stores, and maintains a “buy” rating.

Risk warning: Some store leases cannot be renewed when their leases expire, and new business formats and new stores are expanding at a pace that falls short of expectations.